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From Der Spiegel

German bund futures rose to an almost one-month high after Der Spiegel reported that Greece is considering withdrawing from the euro region, prompting investors to seek a refuge in Europe’s benchmark securities.

The futures contract expiring in June climbed 0.6 percent to 123.76 as of 6:20 p.m. in London. Greece isn’t considering abandoning use of the euro as its currency, the Athens-based Finance Ministry said in an e-mailed statement today. Such reports have been repeatedly denied by Greece in the past as well as by governments of other European Union countries, the statement said.

Greece is lobbying for easier terms on the 110 billion euros ($164 billion) of bailout loans as speculation of a default mounts a year after European leaders set up the unprecedented emergency fund to prevent the nation’s debt woes from spreading.

“Some sort of Greek restructuring was priced in the market, but the thought of them leaving the euro-zone never really was,” said Anthony Cronin, a Treasury trader at Societe General in New York. “If there’s something that happens over there this weekend, you’ve got to be properly positioned for it.”

The euro fell against all of its 16 most-traded counterparts, extending its two-day loss as much as 3.1 percent, the most since May 2010. U.S. Treasury notes reversed earlier losses as investors also sought U.S. government debt as a haven.

Debt Burden

EU leaders agreed in March to create a permanent rescue mechanism for the euro area, the European Stability Mechanism, or ESM. The ESM, which becomes effective in mid-2013 after a temporary facility expires, will make loans to fiscally strained governments under strict conditions. When governments can’t cover their debts in full, the ESM’s loans may be paid first, before private bondholders.

Even under cuts imposed as a bailout condition, Greece’s debt is forecast to climb to 159 percent of gross domestic product in 2012. The nation’s economy is forecast by the government to shrink for a third year in 2011, before returning to growth in 2012.

Greece’s possible exit from the euro area isn’t being discussed in the EU, said Steffen Seibert, German Chancellor Angela Merkel’s chief spokesman. “This isn’t on the table and hasn’t been on the table for the German government and isn’t a topic at the European level,” he said by telephone today.

Since exit is the sensible option for the people of Greece, this denial by Herr Siebert could signal an outbreak of common sense…